Correlation Between BNY Mellon and Federated Hermes

Can any of the company-specific risk be diversified away by investing in both BNY Mellon and Federated Hermes at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BNY Mellon and Federated Hermes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BNY Mellon ETF and Federated Hermes ETF, you can compare the effects of market volatilities on BNY Mellon and Federated Hermes and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BNY Mellon with a short position of Federated Hermes. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNY Mellon and Federated Hermes.

Diversification Opportunities for BNY Mellon and Federated Hermes

0.93

Correlation Coefficient

BNY Mellon  Federated Hermes

Almost no diversification

The 3 months correlation between BNY and Federated is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding BNY Mellon ETF and Federated Hermes ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Hermes ETF and BNY Mellon is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BNY Mellon ETF are associated (or correlated) with Federated Hermes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Hermes ETF has no effect on the direction of BNY Mellon i.e., BNY Mellon and Federated Hermes go up and down completely randomly.

Pair Corralation between BNY Mellon and Federated Hermes

Given the investment horizon of 90 days BNY Mellon is expected to generate 1.4 times less return on investment than Federated Hermes. But when comparing it to its historical volatility, BNY Mellon ETF is 4.55 times less risky than Federated Hermes. It trades about 0.85 of its potential returns per unit of risk. Federated Hermes ETF is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,373  in Federated Hermes ETF on December 20, 2024 and sell it today you would earn a total of  44.00  from holding Federated Hermes ETF or generate 1.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

BNY Mellon ETF  vs.  Federated Hermes ETF

BNY Mellon ETF

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon ETF are ranked lower than 66 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, BNY Mellon is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Federated Hermes ETF

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Hermes ETF are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Federated Hermes is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with BNY Mellon and Federated Hermes

The main advantage of trading using opposite BNY Mellon and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNY Mellon position performs unexpectedly, Federated Hermes can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Federated Hermes will offset losses from the drop in Federated Hermes' long position.

The idea behind BNY Mellon ETF and Federated Hermes ETF pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Correlations module to find global opportunities by holding instruments from different markets.